nd national health care reform – affordable care act – jerry rhinehart, cic, clu, chfc, rhu...

National Health National Health Care ReformCare Reform

– Affordable Care Act –

Jerry Rhinehart, CIC, CLU, ChFC, RHU

Panama City, FL

Rev 10-07-2013

Please note:

DISCLAIMER

NHR - 100 Years in the Making

Patient Protection and Affordability Care Act

Signed in to law March 23, 2010

HealthCare.gov

Other very useful websites as they relate to NHCR:

NAHU.org (National Assoc of Health Underwriters)

KFF.org (Henry J. Kaiser Family Foundation)

aetna.com/health-reform-connection/ index.html

UPC.com (United Health Insurance – Reform Resource Center)

93 TOTAL provisions will be enacted over the 10 year time span that will impact: every US citizen, health

insurance coverage, health insurance companies, pharmaceutical

companies, employers, Medicare, Medicaid, taxes (21 major),

substantial regulations for hospital & physicians, … and even required

posting of nutritional content at your favorite fast food restaurant.

Provides refundable and advanceable tax credits and cost sharing subsidies to eligible individuals. Premium subsidies are available to families with incomes between 133-400% of the federal poverty level (FPL) to purchase insurance through the Exchanges, while cost sharing subsidies are available to those with incomes up to 250% of the poverty level.

Health Insurance Premiums and Cost-Sharing Subsidies (2014)

Understanding Health Insurance Subsidies (2014)

2013: CMS

400% FPL _

250% FPL _

133% FPL _ _133% FPL

_250% FPL

_400% FPL

_100% FPL 100% FPL _

Required to show proof of a QHP- but no financial assistance of any form

Required to show proof of a QHP- and eligible for advanced premium tax credits

Required to show proof of a QHP- and eligible for advanced premium tax credits and cost-sharing reductions

Eligible for Medicaid – little or no cost

Per ACA rules… to qualify for Medicaid medical coverage there is only ONE test a person must meet – INCOME (but NOT assets) – (page 31)

Introduction to Key ACA Terms

MLR (Medical Loss Ratio – 80% Small Group and

Individual – 85% Large Group) (eff 01-01-2011)

Example of NAIC Calculation Model for MLR Refunds:

$400 x 12 = $4,800 x 80% - 77% = 3% = $144

Total Premium received by the insurer from the

enrollee (minus applicable taxes & fees)

The difference between the required MLR and the insurer’s

X = Rebate

Note: Insurers began making the1st round of rebates to affected consumers on August 01, 2012 11

NOTE: The MLR requirement does NOT apply to ERISA plans - fully or

partially self-funded. (See page 12)

Also, note on page 12 the components of the MLR calculation

FPL (Federal Poverty Level – 133% - 400%) (eff 01-

01-2014) (NOTE: Box #1 on the Employees W-2)

Income Single Family of 4100% FPL $10,170 $23,050133% FPL $15,282 $31,322400% FPL $45,960 $94,200

Federal Poverty Level (FPL) – National Incomes (Gross) except for Hawaii and Alaska – 2012-2013

Source: http://www.familiesusa.org/resources/tools-for-advocates/guides/ federal-poverty-guidelines.html

NOTE: Median Household Income for US in 2011 - $50,054U.S. Census Bureau – http://www.census.gov/prod/2011pubs/p60-239.pdf

FPL (Federal Poverty Level – 133% - 400%) (eff 01-

01-2014) (NOTE: Box #1 on the Employees W-2)

FTE (Full Time Employee – 30 hours per week)

(eff 01-01-2014) NOTE: Definition applies to ACA ONLY

Health Insurance Exchange (eff 01-01-2014)

“Marketplace” as of 01-23-13

Exchange Navigators (eff 01-01-2014)

Introduction to Key PPACA Terms

Recent ACA Legislative Changes

W-2 Reporting (Fall 2010) – DELAYED - Now

voluntary for 2011. Implementation begins in 2012 for ALL

‘ERs that provide health insurance who issued 250+ W-2s in

W-2 Reporting (Fall 2010) – DELAYED – Nowvoluntary for 2011. Implementation begins in 2012 for ALL ‘ERs that provide health insurance who issued 250+ W-2s in

1099 Reporting ($600) – REPEALED – Spring 2011

CLASS (LTC Option) – Tabled Late-Summer 2011 – “killed” by the “fiscal cliff” negotiation - 01/2013

Employer Penalty (50 or more FTEs) – DELAYED (07/02/13) – Now to be implemented 01-01-2015

Per ACA published rules, individuals applying for a ‘subsidy’ would have to should proof of income. Now: “no proof required – we take your word”. (07/05/13)

Recent ACA Legislative Changes

Health Reform Implementation Timeline

Insurance reforms2010

Key Provisions of Insurance Reforms (2010)

Provide dependent coverage up to age 26 (eff 09-23-10)

- Includes adult children that no longer attending college,

those not living with their parents, and those adult

children who are married (even with their own children).

* This provision does not extend to the spouse or any

children of the adult child being covered.

- Applies to plans that already offer dependent coverage. If

coverage exist, the ‘ER must inform ‘EEs that their

children, who may have aged out of the plan, will again

be eligible starting January 1, 2011.

Prohibit individual and group plans from placing limits

on coverage (eff 09-23-10)

Policy Limits (Annual and / Lifetime)

- Lifetime limits prohibited on health coverage (2010)

- Annual limits prohibited (2014)

Effective 2014 No Plan Can Have any Annual Policy Limit cap and

Phased in as Follows: 2011 - $750,000 2012 - $1.25 million 2013 - $2 million

(“Mini-Med” issue)

Policy Limits (Annual and / Lifetime)

- Lifetime limits prohibited on health coverage (2010)

- Annual limits prohibited (2014) (“Mini-Med” issue)

By August 30, 2011 there had been 1,497 “waivers” granted by HHS.

“Waivers” are granted for 1 year. Any new “waivers” ended as of 09-22-11.

Currently there @ 3 million EEs covered under “waived plans” – 1.5

million are in various unions.

Pre-existing conditions- Creates a temporary program to provide health coverage

to individuals with, 1) pre-existing medical conditions, and, 2) who have been uninsured for at least six

months.

- Children under age 19 cannot be denied insurance coverage due to a pre-existing condition.

Tax credit to small employer (25 and under) that provide health insurance - with wage restrictions.

MLR (80% - 85%)

Required “wellness” benefits for most plans

Note: This program / provision ran out of funding

03-01-13. No new applicants are being accepted.

Insurance reforms

Medicare (Part D - $250 rebate)

Tax changes (Indoor Tanning Salons / Health Insurance Executive compensation)

Long-term care (CLASS)

Prevention / Wellness (Included for most plans – Individual, Group plan AND Medicare)

Tax Changes

Key Provisions of Tax Changes (2011)

New or revised taxes to help pay for NHCR

- Excludes OTC drugs (not prescribed) from reimbursement

or coverage under a CDHP (HSA, FSA, etc.). Insulin is not

included in this provision.

- Increase tax / penalty from 10% to 20% on non-qualified

distributions from CDHP

- New annual fees on the pharmaceutical manufacturing

sector

Medicare - Reduce rebate by Feds to cover Medicare Part - C (Advantage Plans)

Released 04/02/2013 - The CMS announced a reversal of the funding for Advantage Plans. The ACA had a provision that would have cut funding by 2.3% - but a big push by most Republicans and many Democrats in the U.S. Congress has now resulted in an increase of funding for 2014 by 3.3%.

NEW – 08/01/2012 (8 new preventive health benefits to women at no cost). They

include:

- contraceptives, breast-feeding supplies, screenings for gestational diabetes and sexually transmitted infections and domestic violence, as well as routine check-ups for breast and pelvic exams, Pap tests, and prenatal care.

Summary of Benefit (Standardized language – eff 09-23-12) (see additional comments on page 26)

See: www.healthcare.gov

Search: Summary of Benefits and Coverage

Insurance Reforms (CO-OP; enhanced use of e-filing)

CO-OPs were also affected by

the “fiscal cliff” negotiation in

early January of 2013

Employer Notice Requirements – (03-01-13) Requires employers to provide written notice informing employees about the Exchange and potential eligibility for premium credits. (Released 06/2013 – one for coverage / one for no coverage)

This info is NOT in your outline: Very important … please make a note at the bottom of page 14.

Search: Jones Day aca exchange notification

Employer Notice Requirements – (03-01-13) Requires employers to provide written notice informing employees about the Exchange and potential eligibility for premium credits. (Released 06/2013 – one for coverage / one for no coverage)

Medicare (Phase-in federal subsidies for brand named prescriptions – Part D)

Tax Change

Key Provisions of Tax Changes (2013)

New or revised taxes to help pay for NHCR

- Increase threshold for the itemized deduction for

un-reimbursed medical expenses from 7½% to 10% of AGI

- Increase the Medicare Part A tax rate on wages by 0.9%

(from 1.45% to 2.35%) on earnings over $200K

(individual) and $250K (married/ filing jointly). 3.8%

assessment on unearned income (high income tax

payers)

- Max ‘EE contribution to FSA for medical - $2,500 per year

- Excise tax (2.3%) on medical devices (hip replacement, x-

ray machine, etc. – numerous exceptions exists)

- Eliminated ‘ER deduction for retiree Medicare Part D 15

Individual and Employer Requirements

Individual and Employer Requirements (2014)

Require U.S. citizens and legal immigrants to have

qualified health coverage

- For Individuals: Phased-in tax penalty

- For Large Employers: Possible penalties to “Large ‘ER”

(50 or more FTEs – 30 hrs)

- Complex rules and variables exist

This was the “individual mandate”

litigation ruled upon by the SCOTUS

in June of 2012

Those who fall under the “requirement” but fail to carry at least the “Bronze” plans will be subject to a penalty: (the greater of…) - $95 per year in 2014, $325 in 2015, $695 in 2016 (half that amount for children under age 18), up to maximum of three times those penalty amounts per family, OR,

- 1% of income above the tax filing threshold in 2014, 2% in 2015, and 2½% in 2016

Individual Non-Compliance - ACA (2014)

Income 2014 2015 2016

$100,000

Income

$285 $975 $2,085

$1,000 (1%) $2,000 (2%) $2,500 (2½%)

The penalty is the greater of the two calculations

- Family of Four (includes 2 children under age 18) $100K Taxable -

What are the Potential Financial Penalties to Individuals who do NOT carry insurance?

Individual Non-Compliance - ACA (2014)

The penalty is pro-rated for the number of months without coverage. However, the rules state there is no penalty for a single gap of less than 3 months

for the entire calendar year.

EXAMPLE: The family in the prior slide had no coverage for 4 months (1/3 of the calendar year). The penalty in 2014 would be the greater of $86 ($285 ÷ .333), or $333 ($1,000 ÷ .333) for the entire year.

Individual and Employer Requirements (2014)

So… individuals (and their tax-dependents) will have to

prove they have purchased a QHP in 2014? How does it

appear this will happen?

When you file your taxes you will have to attach

documentation from your health insurance carrier,

employer, or Exchange / Marketplace

If you are a W-2 employee and your employer does

provides a QHP they will have to provide that

information on your W-2 (or similar documentation)

Employer Responsibility / Penalties (2014)

Large Employer (50+ EEs) (* Delayed until 2015)

- Full time employees (30 hrs)

- Part time employees

Small Employer (1 to 49 EEs)

Possible financial penalties for an ‘ERs that DOES NOT

offer coverage *

- If ANY FTE receives premium assistance (due to FPL) from

the government (and through the Exchange) the ‘ER will

face an annual fee of $2,000 imposed on every full-time

‘EE (excluding the 1st 30 ‘EEs). Penalties are pro-rated

monthly.

- EXAMPLE …

- An ‘ER has 65 FTE workers, and does not offer coverage. There is at least one ‘EE who receives premium assistance from the gov’t- To determine the financial penalty 65 Total EEs- Deduct the 1st 30 ‘EEs - 30- Multiply remaining 35 by $2,000 each 35 x $2,000 = $70,000 - Annual penalty paid by the ‘ER $70,000

For Employers That DO NOT Offer Coverage *

Possible financial penalties for an ‘ERs that DOES offer

coverage *

- If ANY FTE receives premium assistance (due to FPL) from

the government (and through the Exchange) the ‘ER will

face an annual fee of the lesser of $2,000 imposed on every

full-time ‘EE (excluding the 1st 30 ‘EEs), OR $3,000 for each

FTE that receives a premium subsidy. Penalties are pro-

rated monthly.

- EXAMPLE …16

- An ‘ER has 65 FTE workers, and does offer coverage. There are 15 ‘EE who receives premium assistance from the government- To determine the financial penalty 65 Total EEs- Deduct the 1st 30 ‘EEs - 30- Multiply remaining 35 ‘EEs by $2,000 each 35 x $2,000 = $70,000 - Penalty paid by the ‘ER $70,000 - OR - 15 ‘EEs receiving premium asst x $3,000 $45,000 - ‘ER assessed penalty – lesser of the two $45,000

For Employers That DO Offer Coverage *

Joe’s Burgers & Shakes *- 3 locations

- 40 FTEs

- 20 PTEs

20 PTEs at 24 hrs per week (1920 hrs / month)

1920 ÷ 120 = 16 PTEs + 40 FTEs =

- Joe is now considered a “LARGE EMPLOYER”

20 PTE x 24 hrs x 4 = 1920 hrs / 120 (minimum FTE work hrs in

a calendar month) = 16 EEs

- ‘ER has 40 FTE workers, and does not offer coverage. There is at least one ‘EE who receives premium assistance from the gov’t- To determine the financial penalty 40 Total EEs- Deduct the 1st 30 ‘EEs - 30- Multiply remaining 10 by $2,000 each 10 x $2,000 = $20,000 - Annual penalty paid by the ‘ER $20,000

Joe’s Burgers & Shakes – Coverage NOT Offered

- ‘ER has 40 FTE workers, and does offer coverage. There are 15 ‘EE who receives premium assistance from the government- To determine the financial penalty 40 Total EEs- Deduct the 1st 30 ‘EEs - 30- Multiply remaining 10 ‘EEs by $2,000 each 10 x $2,000 = $20,000 - Penalty paid by the ‘ER $20,000 - OR - 15 ‘EEs receiving premium asst x $3,000 $45,000 - ‘ER assessed penalty – lesser of the two $20,000

Joe’s Burgers & Shakes – Coverage IS Offered

Consider this Potential Scenario for the Uninformed Business Owner in 2014 (Delayed until 2015)

Mountain Top Resort - Golf Course, Lodge & Spa

- 49 FETs

- Provides NO Qualified Health Plan to its EEs

- So … it pays no ACA “shared responsibility payment”

- But business improves … so, they hire a new FTE (#50)

for the entire year. Look what it will cost as

mandated by the ACA if only ONE FTE receives a

subsidy:

- $2,000 x 20 (50 – 30) = $40,000

FPL and how it will work in 2014 (and later)

- Premium assistance for those individuals earning less

than 400% of FPL. Currently (2013 numbers), this is

income at $45,980 for an individual and $94,200 for a

family of four.

- The premium assistance will INCREASE to eligible

individuals / families as the percentage of FPL goes

The CBO’s estimates of the average individual subsidy: 05/2010 was $3,970; 10/2012 was revised to $4,780;

02/2013 was revised to now be $5,510

In terms of calculating potential penalties, part-time

employees (and their hours) are only used to see if an

employer is a “large employer”.

- Penalties (if any) are ONLY calculated on FTEs

- No penalties on part-time employee, even if that part-time

employee received Premium Assistance.

- If no FTE receives Premium Assistance (only part-time)

the employer will have no possibility of a penalty.

Potential Penalties for Employers Under PPACA – 2014 *

Start HerePenalties do not apply to small ‘ERs

‘ER must pay a penalty for not

offering coverage

‘ER must pay a penalty for not

offering affordable coverage

No penalty to ‘ER since it offers

affordable coverage

Does the ‘ER have at least 50 FTEs?

If ‘ER has 25 or fewer ‘EEs and average

wage up to 25K – ‘ER may be eligible for a health insurance tax

credit.

Does the ‘ER offer coverage to its

workers?

‘ER penalty is $2,000 annually times the

number of FTEs minus 30.The penalty is

increased each year by the growth of ins

premiums.

Did at least one ‘EE receive Premium

Assistance or cost-sharing subsidy?

Does the insurance pay at least 60% of covered health expenses (for the

typical population?)

Do any ‘EEs have to pay more than 9.5% of individual income for self-only coverage?

‘EEs can choose to buy coverage in an

Exchange and receive a premium tax credit.

‘EEs can choose to buy coverage in an

Exchange and receive a premium tax credit.

‘ER penalty is $3,000 annually for each FTE receiving a premium tax credit, up to max of $2,000 times the

number of FTEs minus 30. The penalty is

increased each year by the growth of ins

premiums.

Source: Kaiser Family Foundationhttp://healthreform.kff.org/the-basics/employer-penalty-flowchart.aspix 17

In 2014, Employers (50 + FTE) must decide … *

- Whether to offer medical coverage or potentially face a

financial penalty;

- If coverage is provided to employees … is it considered

“affordable” enough to avoid a potential financial penalty?

NOTE: Employers will not be required to provide health insurance to employees in 2014.

Individuals will be required to maintain a QHP or face a penalty. But the possibility of “penalties”

to the employer will probably make them discuss the various options with their accountant and

health insurance professional.

In 2014, Employers (50 + FTE) must decide … *

- Whether to offer medical coverage or potentially face a

financial penalty;

- If coverage is provided to employees … is it considered

“affordable” enough to avoid a potential financial penalty?

NOTE: The FPL issue is actually a multiple part question / test: 1) Is the ‘EE under 400% FPL?; 2) Does

the ‘ER provide a plan that pays least 60% of the health expenses (for the typical population); 3) Is the ‘EEs required premium contribution “unaffordable” -

meaning …does it exceed 9.5%* of the employee’s income for self-only coverage? 18

QHP Premium Paid by the Employee – Is It Affordable?- Sarah’s annual salary is $40,000. Her husband’s salary with

another ‘ER is also $40,000. They have two children under age 18. They would be eligible for premium assistance

due to the FPL rule. Sarah’s ‘ER provides her a QHP. - Sarah’s QHP covers all family members. The annual cost of

the self-only portion is $4,800 annually ($400 per month).

- The ‘ER pays 90% of Sarah’s premium ($360 per month) and Sarah pays the remaining 10% ($40 per month). She pays 100% of the family member’s premium.

- 9.5% of Sarah’s annual income (40,000 x 9.5%) is $3,800. That works out to be $316.66 per month. Thus the ‘EE

required premium is considered “affordable”. Sarah is NOT eligible for any premium assistance.

Percent of Federal Poverty Level in 2012

Maximum Premium As a % of Income in 2014

133% 2.00%133.01% 3.00%

150% 4.00%200% 6.30%250% 8.05%300% 9.50%400% 9.50%

Maximum Premium Payment Under ACA

Jimmy – Bartender for Beach Grill (has 15 EEs)

Jimmy is single - his W-2 shows $34,000 (@300% FPL)

Scenario #1 - Beach Grill provides NO QHP Jimmy can go to the Marketplace and apply for a subsidy and select the plan he desires. He will pay the balance of the un-subsidized premium. Beach Grill will have no ACA penalty placed on them for not providing a QHP.

Scenario #2 - Beach Grill provides a plan of health that is classified as a ‘Mini-Med’

($50,000 annual limits) This plan of insurance is NOT a QHP. Jimmy can go to the Marketplace and apply for a subsidy and select the plan he desires. He will pay the balance of the un-subsidized premium. Beach Grill will have no ACA penalty placed on them for not providing a QHP.

Scenario #3 – ER provides a Bronze Plan (QHP) and pays 70% of Jimmy’s premium. What Jimmy has to pay works to be 15% of his income. Jimmy’s premium is ‘unaffordable’. He can go to the Marketplace and apply for a subsidy and select the plan he desires. He will pay the balance of the un-subsidized premium. Beach Grill will have no ACA penalty placed on them when Jimmy receives a subsidy.

Scenario #4 – Beach Grill provides a Bronze Plan (QHP) and pays 90% of Jimmy’s premium. What Jimmy has to pay works to be 8% of his income. But Jimmy wants a Gold plan… one that will pay more of covered claims.

The premium is considered ‘affordable’. Jimmy is NOT eligible for a subsidy since the employer’s plan is both a QHP and is ‘affordable’. If he wants a broader plan he will pay the FULL cost. Beach Grill will have no ACA penalty - even if they were to have 50+ EEs.

Insurance Reforms

Key Provisions of Insurance Reform (2014)

Create state-based Health Benefit Exchanges & SHOP

(Small Business Health Options)

Create state-based Health Benefit Exchanges

(Marketplace) & SHOP

QUESTIONS:

What is an Exchange?

Who will operate it?

What will it physically look like?

What if a state says “NO”? (which 27 states – including Louisiana – have done so)

States Health Insurance Marketplace Decisions, May 10, 2013

Partnership Marketplace (7 states)

State-based Marketplace (16 states and DC)

Federally-facilitated Marketplace (27 states)

* In Utah, the federal government will run the marketplace for individuals while the state will run the small business, or SHOP, marketplace.

Health Insurance Marketplace (2014)

Goal of PPACA: 1) provide health care to millions of

uninsured Americans, and, 2) making that coverage

more affordable.

- Introduce managed retail competition into the

marketplace and encourage better pricing and

quality coverage

- Easier “comparison” shopping

- Offer choices in standard benefit plans and levels of

coverage

- Clear communication regarding plans and rates 19

Marketplace and the PPACA (in 2014)

O Marketplaces will be eligible to most “non-employees”, but not an “open market” to go

shopping- Work at companies with less than 100 Employees- Work for a company that does not provide health insurance - Self-employed- Unemployed- Retired, but not eligible for Medicare - Small business- After 2017, medium and large businesses will be eligible

NOTE: Subsidies for eligible

individuals (under 400% FPL and

other rules) will only be available

through the Marketplace.

PPACA – Four Levels (“Tiers”) of Coverage:Plan Level Percent of Average

Medical Cost CoveredConsumer Cost-

Sharing

Platinum 90% 10%

Gold 80% 20%

Silver 70% 30%

Bronze 60% 40%

Note: Insurance carriers can sell in or out of the Marketplace. The PPACA will allow states the option to require additional “state specific mandates”. Additionally, insurance carriers (and agents) may find a niche sales area in the FSA, supplemental accident, critical illness, or similar products. 20

Tax “Dumpster” (Subsidy)

Exchange / Marketplace(State or Federal)

Application (on-line or paper)

Social Security

Homeland Security

Internal Rev Service

After Approval – Selects Ins Company and Medal Plan

Subsidy $$ Goes to

Insurance Company

Applicant Pays

Balance of Premium

USA Today family glitch

Applying For, Renewals and Making Changes - ACA

Applying for and Renewal – including new and revised

subsidy- Oct 1st and then for approximately three month

each year (until March 31, 2014 for this sign-up period only)

What about changes during the calendar year?- Only for special events:

M - MarriageA - AdoptionD - Death

M - MaternityD - Divorce

4335 -

Navigators

- Each Marketplace is required to establish a

“Navigator” program, which will award grants

to “navigators” who educate and enroll

individuals and small businesses in the

Marketplace plans according to established

criteria.

Functions of an Marketplace Navigator: 20

ACA Marketplace Navigators (2014)

- Conduct public education activities to raise awareness

of the availability of QHP

- Distribute fair and impartial information concerning

enrollment in QHPs and the availability of premium tax

credits (subsidies) and cost-sharing reductions

- Facilitate enrollment in QHPs

- Provide referrals for enrollees with grievances,

complaints or questions to any applicable office of

health insurance consumer or appropriate agency20

ACA Marketplace Navigators (2014)

Insurance Reforms / Delivery System

Released December 09, 2012: starting 01-01-2014 every Qualified Health Plan will contain a $63.00 annual per-enrollee fee ($5.25 per month). It will

continue for 3 years and raise @ $25 billion. It will be split as follows: 17½% going to the ACA to “for various ACA plans” and the balance (82½%) will go to the health insurance companies to “cushion the

potential initial expenses and potential losses” regarding “guaranteed issue and no-pre-existing

conditions” starting in 2014. 20

Google: PPACA transitional reinsurance fee crawford

The 2014 Transitional Reinsurance Fee in Action …

- 176 ‘EEs (‘ER currently pay 80% of premium for ‘EE only)

- 164 Individuals covered- 103 Spouses- 209 Dependents- 476 Total covered “heads” (2.7 “covered heads” per ‘EE)- 11 COBRA QB & 9 retirees = 496 total “heads”- $63 x 496 = $31,248

- $31,000 … plus renewal premium that everyone feels will increase in 2014 over 2013 levels!

Create state-based Health Benefit Marketplaces

Require Guaranteed Issue and Guaranteed Renewable

plans in the individual, small groups and Marketplaces

- Premiums / rates must follow required thresholds

concerning ages (3 to 1 limit), rating area, family

composition and tobacco use (max ratio: 1.5 to 1).

Note: No FPL subsidy is allowed for the tobacco surcharge portion on individual plans. Nor is it eligible for a group coverage participation UNLESS they enroll in a “smoking / tobacco cessation program”.

How Might Tobacco Use Impact Your Health Insurance Premiums and Potential Subsidy in 2014 and Beyond?

- Al is 58, single, an auto mechanic, earns $35,000

annually and is not provided a QHP through his

employer (Al’s Garage). He is also a smoker. Assume

his individual QHP cost $9,000 annually. His FPL

subsidy (through the Marketplace) may bring his

premium down to $5,000. If the carrier uses the

full 1.5 tobacco surcharge the premium is increased

by $4,500 (50% surcharge of $9,000) …now a total of

$9,500. Rules DO NOT allow the subsidy to apply to the

surcharge ($4,500). 24

How Might Tobacco Use Impact Your Health Insurance Premiums and Potential Subsidy in 2014 and Beyond?

- Consider this possibility: (assuming Nat Avg Prem - @$14,000)

- Husband & wife (no dependants) / $100,000 annual

income … thus, NOT eligible for a premium subsidy

- Both are tobacco users and their health insurance

carrier uses the maximum allowable surcharge (1.5)

- $14,000 x 1.5 = $21,000

- Options: 1) Pay the premium; 2) Shop the Marketplace

for a better deal; 3) forgo the insurance and pay the

annual penalty ($1,000) – But They Risk Bankruptcy! 24

The ACA and Tobacco Rating

The tobacco surcharge rating can be “state-specific” (Meaning: YES; NO; Percentage less than 1.5) A carrier may charge less than 1.5 – some have announced there will be no tobacco rating Tobacco usage is defined in terms of regular usage and time last used: average of 4+ in a week / within the last 6 months An interesting fact: there are no provisions, questions

nor surcharge regarding the usage of marijuana, cocaine, etc.

Create state-based Health Benefit Marketplaces

Require Guaranteed Issue and Guaranteed Renewable

plans in the individual, small groups and Marketplaces

- Premiums / rates must follow required thresholds

concerning ages (3 to 1 ratio), rating area, family

composition and tobacco use (1.5 to 1 ratio)

Reduce out-of-pocket limits for those with income below

certain Federal Poverty Levels (FPL)

Deductible limitations for small groups (various rules)

Limit new coverage waiting period to 90 days19

Create a health benefit package (Essential Health

Benefits) …

- who has to comply,

- what are the coverage requirements, and,

- who are exempt?

Who Has to Comply? (2014)

… will be included in ALL PLANS …- various government-sponsored programs- eligible employer-sponsored plans - plans in the individual market- grandfathered group health plans- others (as recognized by HHS)

So… who has to comply with the ACA? All for-profits companies, all non-profits (churches, universities, schools, etc.), governmental entities (state, local, municipalities, etc.), and, of course, individuals. Basically, NO one is exempt!

What are the Coverage Requirements? (2014)

Coverage must include benefits for: 1)Ambulatory patient services; 2)emergency services; 3)hospitalization; 4)maternity and newborn care; 5)mental health and substance use disorder services, including behavioral health treatment;6)prescription drugs; 7)rehabilitative services and devices; 8)laboratory services; 9)preventive/ wellness/ disease management; 10)pediatric services, including oral and vision care.

Who are Exempt? (2014) Coverage will be required to be maintained by all individuals, with EXCEPTION:

- religious objections, - financial hardships, - undocumented immigrants, - American Indians, - those incarcerated, - citizens not residing in the U.S., - people earning under the tax-filing threshold, and,--

those with short gaps in coverage

“Coverage Requirements” (2014)

Recently announced by HHS: If an Employer provides a QHP for its employees, it must also make available:

… but the employer is NOT required to make any contribution toward the dependant coverage

Create a health benefit package (Essential Health

Benefits) : States can add to the ACA mandated list,

but cannot restrict, or take away from the ACA list.

Everyone in that state will have to purchase at least

the “minimum plan”. What is your state doing regarding ACA essential

health benefits and required state mandates?

http://www.ncsl.org/issues-research/health/state-ins-mandates-and-aca-essential-benefits.aspx

Insurance Reforms

Premium Subsidies

NOTE: As of January 1, 2014 … an individual / family that receive an ACA subsidy (Exchange) will have a 90 DAY grace period for premium payments! For non-subsidy contracts, it will be 30 days.

-Continue coverage – Insurer covers for 1st 30

- Notify HHS of non-payment

-Notify providers of the possibility of denied claims during 2nd and 3rd months (providers on the hook!)

-Notify the insured he / she is delinquent

- Continue to collect the advanced tax credit on behalf of the policyholder (in case they catch-up premiums!)

-Return the tax credit for the 2nd and 3rd month to the Treasury Department (if insured fails to pay)

-End of grace period - issue termination notice

-… AND – the insurance carrier must also determine whether the insured has a

disability as defined by the Americans With Disability Act … and if so, then make “reasonable accommodations” for such individuals.

Insurance Reforms – States can form “Compacts” to sell QHPs effect in 2015

Medicare - Close the “dough-nut hole” (Part – D Medicare Prescription Drug Benefit - Eff 01-01-2020)

Tax Change - “Cadillac Plan” (2018)

2015 and Later

How Will the Cost of Health Care Reform Be Paid? (Note: Not a Complete List)

1. (2010) Drug manufactures

2. (2010) 10% Indoor Tanning services

3. (2011) Doubles (to 20%) tax on non-qualified HSA distributions

4. (2013) Raises Medicare Part A on wages by 0.9% (over $250,000). Also, 3.8% assessment on “unearned income” (interest, dividends, capital gains, annuities, royalties & rents - $250K excess)

5. (2013) Increase from 7½% to 10% of AGI – medical expenses itemized on Schedule A

6. (2013) Eliminates ‘ER deductions for Part D Medicare for retirees

7. (2013) Limits FSA contributions for medical expenses to $2,500 annually

8. (2013) Imposes 2.3% excise tax on certain medical devices

9. (2014) Phased-in tax penalty for US citizens failing to maintain health insurance (see note on pg 16)

10. (2014) Fine imposed on employers (50 or more full time EEs * ) that do not offer coverage (see note on

pg 16)

It is felt in 2014 (as is the case now)

the bulk of the insurance coverage

will still be provided through

employer-sponsored group plans.

9. (2014) Phased-in tax penalty for US citizens failing to maintain health insurance (see note on pg 14)

10. (2014) Fine imposed on employers (50 or more full time EEs *) that do not offer coverage

11. (2018) Imposes excise tax on “Cadillac Plans”. The tax is paid by the employer.

- The Employer

Insurance premiums are still deductible (with exceptions).

50+ Full Time FTEs – The TWO questions that all Employers will ask?

- Do I provider coverage?

- Do I NOT provide coverage?A possible penalty in either scenario - (2014)*

Mom & Dad, Inc. – 60 ‘EEs in 2013

Mom, Inc – 30 ‘EEs in 2014

Dad, Inc – 30 ‘EEs in 2014

Be VERY Careful! Potential HEAVY penalties under ACA!!

So … Let’s Review – Potential Employer Penalty

Under 50 FTEs 50+ FTEs - No QHP 50+ FTEs – Provides QHP- No chance of ANY penalty- Chance of a tax credit for certain size groups

- One FTE receives FPL subsidy through the Marketplace and ‘ER will have a $2,000 annual penalty on ALL FTEs, excluding the first 30 ‘EEs. Penalty pro-rated monthly. *

- Same rule as to the left, but penalty is the lesser of:-1) Did ‘EE receive FPL subsidy? 2) Is the plan broad enough (60%)? 3) Is ‘EEs required portion of premium for QHP deemed “unafford-able”? If fail on any*, $3,000 for EACH qualifying ‘EE. *

EXAMPLE: 100 ‘EEs. 30 qualifies. 30 x 3,000 = $90,000 (or lesser of table to left).* - Exceptions apply

EXAMPLE: 100 ‘EEs. One ‘EE receives a subsidy. 100 – 30 = 70 x $2,000 = $140,000 (“Shared Responsibility Payment” … which is not deductible) 24

Employer Incentives / Penalties (2014)

In 2014 will be a critical year for Employers as it relates

to National Health Care Reform

- Certain tax incentives will be in place for a business that

has 25 or fewer FTEs (tax incentives will vary depending

on “average income”)

- Potential penalties will exist for a business that has 50 or

more FTEs

- At present there are no tax incentives nor potential

penalties for a business that has 26 to 49 FTEs

The balance of the outline (from the middle of page 25 thru page 46) reviews how the ACA addresses …

Grandfathering

The impact on Medicare and Medicaid

Children’s Health Insurance Program (CHIPs)

Grace Period / “10 Things to Know About Exchange”

The impact on traditional health insurance carriers

The impact on Consumer Driven Health Plans (FSAs, HRAs, HSAs)

The impact on Medicare Supplement and Medicare Advantage plans (Medicare - Part C)

Are Changes Ahead for the ACA?

Various components of the ACA has been challenged in several courts. SCOTUS ruled

(June 28, 2012) that the “individual mandate” is constitutional. There are still a few

challenges in the courts regarding various components of the law. But the Presidential election has settled the issue regarding the

law’s implementation.See article at the end of this outline regarding Taxes, Fees and Premiums 56

- How Can You Understand the ACA -

Let’s Compare it to Property & Casualty Insurance – 2014

ACA Rule - 2014 Property & Casualty Analogy

No one denied coverage Fully underwrittenNo underwriting questions (pre-ex) Fully underwritten

Guaranteed renewable Could be “non-renewed”

No annual / lifetime limits Values: Replacement / ACV

Everyone must have coverage* Only if required by bank / state

Subsidized premiums (133-400 FPL) N/A

80% - 85% Medical Loss Ratio Applies to some lines / states

No Cost Wellness / Prevention N/A

… and remember, more finalized rules are still to be released! 56

National Health National Health Care ReformCare Reform

- Affordable Care Act -

THANK YOU FOR YOUR THANK YOU FOR YOUR ATTENDANCE AND ATTENDANCE AND

PARTICIPATIONPARTICIPATION

Jerry Rhinehart, CIC, CLU, ChFC, RHUJerry Rhinehart, CIC, CLU, ChFC, RHUPanama City, FLPanama City, FL

jerhinehart@comcast.netjerhinehart@comcast.net

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